US Airways 2005 Annual Report Download - page 270

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
The weighted average fair value per share of US Airways Group Class A Common Stock grants was $1.87 and $7.42 in the year ended December 31,
2004 and the nine months ended December 31, 2003, respectively. In order to calculate the stock-based compensation for stock options and warrants using the
fair value method provisions in SFAS 123, US Airways used the Black-Scholes stock option-pricing model with the following weighted-average assumptions:
Predecessor Company
Nine Months
Year Ended Ended
December 31, December 31,
2004 2005
Stock volatility 65% 65%
Risk free interest rate 2.9% 2.2%
Expected life 4 Years 3 Years
Dividend yield — —
US Airways recognized compensation expense related to US Airways Group Class A Common Stock, stock option and stock warrant grants to
US Airways employees of $11 million, $50 million and $135 million for the nine months ended September 30, 2005, the year ended December 31, 2004 and
the nine months ended December 31, 2003, respectively.
Prior to emergence from the first bankruptcy, the Predecessor Company accounted for deferred compensation and the related amortization by applying the
provisions of APB 25 and related interpretations. In accordance with APB 25, deferred compensation related to grants of US Airways Group common stock to
employees ("Stock Grants") was recognized based on the fair market value of the stock on the date of grant. Except on limited occasions, no deferred
compensation was recognized when options to purchase US Airways Group common stock were granted to employees ("Option Grants") because the exercise
price of the stock options was set equal to the fair market value of the underlying stock on the date of grant. Any deferred compensation was amortized as
Personnel costs over the applicable vesting period.
US Airways recognized expenses related to Stock Grants of $1 million for the three months ended March 31, 2003.
There were no stock options awarded in the three months ended March 31, 2003 or the nine months ended December 31, 2003.
Compensation expense of $1 million, calculated using the provisions of APB 25, has been recorded for stock appreciation rights and restricted stock units
granted to US Airways employees in the fourth quarter of 2005.
15. 2003 Fresh-start reporting
In connection with its emergence from the first bankruptcy on March 31, 2003, US Airways adopted fresh-start reporting in accordance with SOP 90-7.
Accordingly, US Airways valued its assets, liabilities and equity at fair value. The excess of the reorganization value over tangible assets and identifiable
intangible assets was reflected as goodwill on the balance sheet. Estimates of fair value represented the best estimate based on independent appraisals and
valuations and, where the foregoing were not available, industry trends and by reference to market rates and transactions. US Airways Group's equity value of
$438 million at March 31, 2003 was determined with the assistance of financial advisors. In determining the equity value, the financial advisors and
US Airways Group considered several matters, including the following: (i) certain recent financial information of US Airways Group; (ii) certain financial
projections prepared by US Airways Group in connection with the ATSB Loan and the investment agreement with
264